NEW YORK -- Oil prices spiked more than $25 a barrel Monday—the biggest one-day price jump ever—as anxiety over the government's $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally, reported the Associated Press. Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37.
Meanwhile, August oil product deliveries, a measure of demand, fell 3% from a year ago even as prices for gasoline, diesel and other products were declining, [image-nocss] according to API's Monthly Statistical Report. August gasoline demand slipped about 2.2%. While August prices for gasoline were up 36% from a year ago, from early July to late August this year they fell 43 cents per gallon. "Because of higher prices and economic uncertainty, we aren't using or importing as much oil," said Ron Planting, manager, information and analysis for API.
In terms of the spike, the contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.
Still, the rally, which shattered crude's previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market. The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit. Trading resumed seconds later after the daily limit was increased. The November crude contract, which became the front-month contract at the end of Monday's session, was trading at $108.69, up $5.94, still a sharp gain.
Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide below $100. At this rate, crude is within striking distance of its all-time record of $147.27, reached in July.
There is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations. Though pump prices have eased from record levels above $4 a gallon, they remain expensive, and more softening in the economy would likely further curtail energy use in the world's thirstiest consumer.
Regarding product deliveries, for the first eight months of the year compared to a year ago, demand for all petroleum products declined 4%. "The last time January-to-August deliveries experienced a year-to-year decline of this magnitude was more than a quarter century ago, in 1982," said Planting.
In August 2005, the nation consumed more oil than in any August ever, a total of 21.7 million barrels a day. At 20.4 million barrels a day, August 2008 deliveries were nearly 6% less.
Inputs to crude distillation units, an overall measure of refinery activity, were 4.1% below August 2007. The slide partly reflects preparation for hurricanes at Gulf Coast refineries. Nevertheless, combined production of the four major oil products (gasoline, distillate, residual fuel oil, and kerosene jet fuel) was at the third-highest-ever monthly level.
While refiners continued to produce impressive amounts of gasoline and other oil products, product imports fell by nearly 14%, with total gasoline imports averaging 1.1 million barrels a day in August. The record for gasoline imports for any month is 1.5 million barrels per day in October 2005.
Crude oil imports in August 2008 were down 2% from August of last year.
Gulf Coast hurricane preparations and shutdowns and maintenance in Alaska combined to depress August U.S. crude oil production by 1% from a year ago to an average of 4.87 million barrels a day. Alaska's crude oil output for the month was the lowest since July 1977, the first full month of operation of the Trans-Alaskan Pipeline System.
Crude inventories at the end of August were 302.5 million barrels, 0.6% below the five-year average for that month. Gasoline inventories were 197.8 million barrels, within 0.7% of the five-year average.
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